Austrian Economics
From Wikipedia - (I have cut this and edited out the more confusing aspects - read it carefully and you will find it actually does make sense)
The Austrian School is a school of economic thought that emphasizes the spontaneous organizing power of the price mechanism or price system. Austrians hold that the complexity of human behavior makes mathematical modeling of the evolving market extremely difficult and advocate a laissez faire approach to the economy. Austrian School economists advocate the strict enforcement of voluntary contractual agreements between economic agents, and hold that commercial transactions should be subject to the smallest possible imposition of forces they consider to be coercive (in particular the smallest possible amount of government intervention).
The Austrian School derives its name from its predominantly Austrian founders and early supporters, such as Ludwig von Mises. Another prominent Austrian School economist is Henry Hazlitt - well worth a read. Though called 'Austrian' today, supporters or proponents of the Austrian School can come from any part of the world. The Austrian School was influential in the early 20th century and was for a time considered by many to be part of mainstream economics.
Inflation
The Austrian School has consistently argued that a "traditionalist" approach to inflation yields the most accurate understanding of the causes (and the cure) for inflation. Austrian economists maintain that inflation is by definition always and everywhere simply an increase in the money supply, which in turn leads to a higher nominal price level for assets (such as housing) and other goods and services in demand, as the real value of each monetary unit is eroded, loses purchasing power, and thus buys fewer goods and services.
Given that all major economies currently have a central bank supporting the private banking system, almost all new money is supplied into the economy by way of bank-created credit (or debt). Austrian economists believe that this bank-created debt growth (which forms the bulk of the money supply) sets off and creates volatile business cycles and they maintain that this "wave-like" or "boomerang" effect on economic activity is one of the most damaging effects of monetary inflation.
According to the Austrian Business Cycle Theory, it is the central bank's policy of ineffectually attempting to control the complex multi-faceted ever-evolving market economy that creates volatile credit cycles or business cycles, and, as a necessary by-product, inflation (especially in asset markets). By the central bank artificially "stimulating" the economy with artificially low interest rates (thereby permitting excessive increases in the money supply), the government-sponsored central bank itself allows debasement of the means of exchange (money). [Conspiratists accuse the banks of doing this on purpose to gain their wealth when they foreclose.]
The Austrian School also views the "contemporary" definition of inflation as inherently misleading in that it draws attention only to the effect of inflation (rising prices) and does not address the "true" phenomenon of inflation which they believe is the debasement of the means of exchange. They argue that this semantic difference is important in defining inflation and finding a cure for inflation.
Austrian School economists maintain the most effective cure is the strict maintenance of a stable money supply. Ludwig von Mises, the seminal scholar of the Austrian School, asserts that: Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation. But people today use the term `inflation' to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. . . . As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation - rising prices. Their ventures are doomed to failure because they do not attack the root of the evil. They try to keep prices low while firmly committed to a policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, there cannot be any question of stopping inflation.
Austrian School economists claim that the state uses inflation as one of the three means by which it can fund its activities, the other two being taxing and borrowing. Therefore, they often seek to identify the reasons for why the state needs to create new money and what the new money is used for. Various forms of military spending are often cited as reasons for resorting to inflation and borrowing, as this can be a short term way of acquiring marketable resources and is often favored by desperate, indebted governments. In other cases, the central bank may try avoid or defer the widespread bankruptcies and insolvencies which cause economic recessions or depressions by artificially trying to "stimulate" the economy through "encouraging" money supply growth and further borrowing via artificially low interest rates. Accordingly, many Austrian School economists support the abolition of the central banks and the fractional-reserve banking system, and advocate instead a return to money based on the gold standard, or less frequently, free banking. Money could only be created by finding and putting into circulation more gold under a gold standard.
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It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights. The demand for constitutional guarantees and for bills of rights was a reaction against arbitrary rule and the non-observance of old customs by kings.